When you rack up a substantial amount of credit card debt and it becomes overwhelming, you need to work with the credit card company to find a solution. When a bank recognizes your inability to pay, their focus shifts from generating profit to recouping losses. This shift may give you an opportunity to negotiate with the credit card company to settle your debt without having to pay back the full balance.[1]XResearch source If you do not feel comfortable negotiating on your own, you can hire professional help (e.g., debt settlement companies, credit counselors, or lawyers). Before you negotiate, you need to adequately prepare. When negotiations have wrapped up, you need to formalize your agreement in writing.

Assess your credit card debt situation. While it may seem backwards, credit card companies are more likely to settle when the debts are large. Since credit card debt is unsecured they recognize the chance that they will recoup nothing if you file for bankruptcy or ignore the debt. When credit card debts are smaller, bankruptcy does not hover over the case and it is easier for you to pay back the full amount you owe.[2]XResearch source

Know the generally accepted standards of credit card negotiations. Credit card companies settle debts regularly using generally accepted arrangements. While it is not impossible to negotiate a more unique settlement it may prove difficult.[3]XResearch source Most credit card companies settle in the following manners:[4]XResearch source[5]XResearch source

Moving payment dates

Reducing interest rates

Payment reductions

Forbearance (not making any payments for a period of time)

Lump sum payments, which is a one time payment in exchange for the credit card company's debt forgiveness

Determine what type of negotiation will likely take place. Negotiations take many forms and each form will affect the way you negotiate. If you only have one credit card with this particular company you want to negotiate with, it will likely be a one time negotiation where you will not have to interact with the company ever again once the settlement has been reached and fulfilled. However, if you have more than one credit card with this company, or if the settlement you reach is going to create a long-term relationship with the company, you might have to negotiate differently. Recognizing the type of negotiation likely to take place will help you determine how to approach the negotiation.[6]XResearch source

For example, if the negotiation is likely a one time thing, you might be able to negotiate more aggressively, which might in turn harm relationships. However, if you will need to work with the credit card company again, you might not want to be aggressive and harm those relationships. Think about these things as you assess your negotiation tactics.

Analyze the type of conflict you will face. During most negotiations, conflicts arise in two different ways. First, agreement conflicts arise when your position is in direct conflict with the credit card company's beliefs and opinions. Second, allocation of resources conflicts arise when two parties cannot agree on how something will be split up. During some negotiations you may only see one type of conflict, while in others you might have a combination of both. Understanding how conflicts arise and the form they take will help you prepare and focus your negotiation tactics.[7]XResearch source In the credit card debt context, these types of conflict can arise in the following ways:

Agreement conflicts might arise when you believe your payment date should be pushed back but the credit card company has a policy of not doing so.

Allocation of resources conflicts might arise when you believe the debt should be settled for a certain dollar amount with no interest included, while the credit card company believes you should pay more to have your debt relieved, which should include interest.

Consider what the negotiation means to you. Ask yourself whether you are negotiated because you have to or because you see an opportunity. If you are negotiating because you have to, you will likely have less power throughout the negotiation process. On the other hand, if you are negotiating because you see an opportunity, you might have more power at the table and you might be willing to walk away without an agreement.[8]XResearch source

For example, if you are negotiating a reduced interest rate because you heard about a friend's rate on the same credit card, you are negotiating because you see an opportunity. In this scenario, you can be more aggressive and concede less, because you do not feel the pressure of having to come to an agreement.

However, if you are negotiating a lump sum settlement because you can no longer make credit card payments, you will most likely be negotiating out of necessity. Here, you may have to concede more to the credit card company because you feel obligated to come to an agreement.

Come up with a best alternative to a negotiated agreement (BATNA). You need to evaluate possible settlements against the alternatives of not reaching an agreement with the credit card company. Ask yourself what your best option is if you do not reach a settlement. The best alternative you can think of is called your BATNA. For example, if you do not reach a settlement regarding your credit card debt, you might file for bankruptcy or take out a loan to pay off the debt. These alternatives are possible BATNAs.

The value of your BATNA will help you determine your reservation price, which is the most you would pay, or the least you would take, to make a deal during negotiations. For example, if your BATNA is filing for bankruptcy, the cost of bankruptcy should be determined. Assume that cost is $10,000 plus the loss of certain assets (e.g., cars and homes).

Once you know the cost of your BATNA, you will be able to evaluate any settlement offer against it. You should reach a settlement so long as it is better than your BATNA. However, if a settlement offer puts you in a worse position than you would be in if you accepted your BATNA, you should not agree to it. For example, if the credit card company offers to relieve your debt but in exchange you will have to pay $15,000 and give up your home, you might walk away and implement your BATNA.[9]XResearch source

Be creative when you think about solutions. The more options you put together while you are preparing, the more options you will have during the negotiation process. While most credit card companies stick to traditional settlement methods (e.g., lump sum payments and repayment plans) you should not constrain yourself to those methods. The goal in any negotiation is to find a deal that benefits both parties. Here, you want to relieve your debt for as little as possible and the credit card company wants to recoup as much money as possible.

Write down as many ideas as you can think of. Do not worry about whether the credit card company is likely to accept it, or whether you think the idea is crazy. When considering ideas, think about your interests as well as the credit card company's interests.[10]XTrustworthy SourceHarvard Business ReviewOnline and print journal covering topics related to business management practicesGo to source

For example, if your interest is to relieve credit card debt, consider unique ways you can do that. Obviously you can pay in cash, but maybe you can pay with property or services as well (e.g., extra cars or homes you have, or maybe you can work for the credit card company to repay your debt if you have a skill they need).

Ask yourself who needs to be involved. Make sure you know the names of credit card company employees who are authorized to negotiate and make binding decisions about your debt. Avoid negotiating with low-level employees who will need to get approval from managers. Often, these employees will not know what is and is not appropriate, and you may waste your time.[11]XResearch source

Before starting formal negotiations, contact the credit card company and ask who you need to speak to to negotiate a settlement. Talk with them briefly and make sure they are authorized to make decisions. If they are, get their contact information so you can set up a time to negotiate after you prepare.

Think about time constraints.[12]XResearch source The longer negotiations take, the more your debt may build up and the more your credit may be negatively affected. Also, if you have hired a lawyer to help you, their legal fees may increase as more time is spent negotiating. Incorporate these thoughts into your preparation. For example, if you think negotiations will take a long time, ask the credit card company up front to freeze your account so you are not incurring extra debt during the negotiation period. In addition, make sure your lawyer is working diligently so you avoid unnecessary legal fees.

Contact a credit counselor. If you are wary of hiring a debt settlement company, consider talking with a reputable credit counselor. These individuals will discuss your entire financial situation in an attempt to help you budget and manage debt. Credit counselors will also be able to give you educational materials and workshop offerings. Most initial consultations will last about an hour and you will usually have the opportunity to follow up when necessary.[13]XResearch source

To find a reputable credit counselor, visit the U.S. Trustee Program website and pick from their list of government-approved organizations.[14]XTrustworthy SourceUnited States Department of JusticeOfficial website of the U.S. Department of JusticeGo to source

Hire a lawyer. If you are facing large debts and possible illegal collection practices, you might consider hiring a lawyer to help you negotiate. As trained professionals, lawyers specializing in credit card debt and collections will know who to talk to and how to talk to them. They will help you prepare, negotiate, and finalize a settlement. To hire a lawyer, ask your friends and family for recommendations.

If you cannot get a quality recommendation, contact your local bar association's lawyer referral service. After answering a few questions about your legal problem, you will be put in contact with various qualified lawyers in your area.

Research debt settlement companies. Debt settlement companies negotiate on your behalf in an attempt to settle your credit card debt for less than the full amount. Before you hire a particular company, make sure you do your research. Start by contacting your state attorney general and local consumer protection agency to ask about the company's reputation. These entities will help you determine whether the company you are looking at is reputable and trustworthy. In addition, perform a simple internet search by typing in the company's name plus the word "complaints." Read what other people are saying about the company.

If you decide to hire a debt settlement company, they will charge you a fee for their services, which includes maintaining an account for the settlement money. The other portion of the fee will be calculated as a percentage of the amount you save because of the settlement.[15]XResearch source

Review the risks associated with debt settlement companies. While hiring a debt settlement company might seem like an easy choice, there are risks. For example, these companies often require you to put money aside each month, for up to 36 months, in a dedicated account, which is managed by a third party. For a lot of people, it can be difficult to set this type of money aside for this long. Additionally, there is no guarantee that the debt settlement company will be able to negotiate a settlement successfully. To try and get some money for their work, they might settle for much less than you would like. Furthermore, these companies often ask you to stop making regular credit card payments, which will negatively affect your credit report.

Before you hire a debt settlement company, make sure you can minimize the risks by budgeting well and requiring a reasonable settlement.[16]XResearch source

Decide where and how you will negotiate. Most credit card companies will want to negotiate over the phone unless you are conveniently located where their offices are. Remote negotiations are often favored when two parties do not like each other, while face-to-face negotiations are helpful when parties don't know each other.

If you and the credit card company have decided to negotiate face-to-face, you will have to work out where the negotiation will be held. If you have hired a lawyer, they might want to conduct negotiations at their office. This might be a power play meant to influence and rattle the credit card company.

However, especially if you are negotiating on your own behalf, you might have to meet the credit card company at their own office. This might not be a bad thing, however, as it allows you to get an idea of where they work and the culture in which they work. This information can then be used to help you negotiate.[18]XResearch source

If possible, go with a lawyer to any face-to-face meetings to be sure your rights are protected and the credit card company knows your are serious about needing to make a deal.

Remain relatively quiet throughout the negotiations. Silence can often be used to your advantage. Most people will try to fill dead air by speaking and rambling on. This will often lead to the credit card company divulging information advantageous to you. Instead of speaking aimlessly, ask pointed questions in order to gather information that can help you find a solution.[19]XResearch source

Engage emotionally in the negotiations. When the credit card company says something you disagree with, look disgusted and offended. These actions will impress upon the company that you are not willing to play around and that you need a reasonable solution. In addition, if you make a big deal out of issues that you do not necessarily care about, you may confuse the credit card company and concede them later without giving much up.[20]XResearch source

Make a self-serving first offer. While you might think its advantageous to let the credit card company make the first offer, this is not always the case. In fact, the first offer is usually the focal point (a.k.a., anchor) of the rest of negotiations, so when you make the first offer, you are actually controlling how the negotiation proceeds. However, if the first offer you make is not well informed, you may alienate the credit card company and risk not coming to a settlement at all.

If you plan on making the first offer, make an offer that can be backed up with ample supporting evidence. Doing so will allow you to control what happens next.[21]XResearch source

Present multiple options to your counterpart. Offer the credit card company choices. By doing so, you will learn about what the other side values. Based on the reaction you get to each offer, you can shuffle them and throw out new options. Your flexibility will also be seen as a sign of goodwill.[22]XResearch source

For example, offer a lump sum payment as well as a forbearance option. If the credit card company doesn't like the forbearance option, throw it out and offer a repayment plan. In this simple sequence of events, you will have shown that you are flexible while learning that the credit card company really wants to get some money quickly (because forbearance would require them to freeze the account for a period of time before they ever receive any money).

Hold your ground. As negotiations proceed, continue to make quality counteroffers without giving up too much. In fact, if the credit card company makes the first offer, consider countering with what would have been your first offer anyway. This will help you avoid the anchor of the first offer.[23]XResearch source

Try showing your hand. If you are having trouble finding a solution, consider telling the credit card company what your BATNA is.[24]XResearch source However, do not simply say "this is my best alternative." Instead, tell the credit card company that you are looking at other options but that you would really like to come to an agreement. In the credit card company context, this can be incredibly persuasive when your BATNA is bankruptcy.

This is the case because, if you file for bankruptcy and the credit card debt is unsecured, the credit card company might not recoup any of their losses if the bankruptcy court forgives that particular debt. If you tell the credit card company you are looking at bankruptcy, they will usually work diligently to get a little money back from you.

Avoid accepting the first offer. Even if the credit card company's initial offer is good, do not simply accept it. See what concessions can be made and come back to their first offer if you have to.[25]XResearch source

Decide who will write the agreement. If you and the credit card company reach an agreement, figure out who will formalize it in a writing. In general, especially if you have the help of a lawyer, you will want to be responsible for drafting. When you draft, you control the terms and the language of the agreement.

However, bigger credit card companies will have forms and templates that they use. They may request that you agree to the language that they have used for years. If you are not represented by a lawyer, this might be your only option.

Spell out the terms of your agreement. If you are able to draft the agreement, make sure you include everything that was discussed during negotiations. Do not leave out any details, no matter how small. In general, your agreement should cover at least the following:

The amount of your agreement (e.g., how much you will have to pay and how much debt is being forgiven in return for your payment).

Any deadlines for lump sum payments and repayment plans.

A description of the debt that is being forgiven and an unambiguous statement that the agreement, if executed, will forgive that debt fully and completely.

A description of how the credit card company will report the debt to credit reporting agencies. This language can affect your credit report and you should hopefully get the credit card company to agree to state it was "paid" as opposed to "paid late" or "settled."

Leave space for signatures. At the end of the agreement, make sure you leave space for each party to sign the agreement and date it. There should be room for each party to print their name, sign their name, and write in the date it was signed.

Execute the agreement. As one final step, you need to get the credit card company to sign the agreement. Make sure that whoever signs it has the authority to do so and bind the company. You will also need to sign the agreement in order for it to be executed.

Realize that even though the debt is unsecured, credit card companies can still sue, get a judgment, and take any free assets to apply to the debt owed to them.